Mar 11, 2020 - Economy & Business

Coronavirus has disrupted supply chains for nearly 75% of U.S. companies

Dion Rabouin, author of Markets

Employees produce medical masks at Madaran Medical Manufacturing Company in Robat Karim district of Tehran, Iran. Photo: Fatemeh Bahrami/Anadolu Agency via Getty Images

The COVID-19 outbreak has caused supply chain disruptions for nearly three-quarters of U.S. companies, and many are already pricing in revenue losses this year as a result, according to a special ISM survey.

What's happening: Data show global production out of China fell to an all-time low last month, with freight and shipping slowing dramatically as the virus has shuttered factories and container ports.

  • Quarantined workers and shortages of components have further crimped the availability of goods from China, which is the world's hub for manufacturing.

The intrigue: Of the companies surveyed that expect supply chain impacts (80% said yes), most expect the severity of the disruptions will increase after the first quarter of this year.

Why it matters: The virus' impact has not yet been quantified, but the survey from the Institute for Supply Management — the first of its kind — shows just how widespread its impacts have already been for American businesses.

  • “The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the virus outbreak,” ISM CEO Thomas W. Derry said in a statement.
  • “For a majority of U.S. businesses, lead times have doubled, and that shortage is compounded by the shortage of air and ocean freight options to move product to the United States -- even if they can get orders filled.”

Details: ISM's business contacts, of which 81% are firms with revenues of less than $10 billion, reported a laundry list of disruptions that have already resulted from the outbreak.

  • Manufacturers in China report operating at 50% capacity with 56% of normal staff.
  • More than 44% of respondents said they did not have a plan in place to address supply disruption from China.
  • Six in 10 (62%) respondents are experiencing delays in receiving orders from China.
  • More than half (53%) are having difficulty getting supply chain information from China.
  • Nearly one-half are experiencing delays moving goods within China (48%).
  • Almost one-half (46%) report delays loading goods at Chinese ports.

Of note: The survey was conducted between Feb. 22 and March 5 among 628 respondents that largely represent U.S. organizations.

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